With Cuts, Cuomo Offers Shrunken Budget

ALBANY — Declaring New York State “functionally bankrupt,” Gov. Andrew M. Cuomo proposed a $132.9 billion budget on Tuesday that would reduce year-to-year spending for the first time in more than a decade, slash projected spending on education and health care, and slice the budget for state agencies by more than half a billion dollars in the next fiscal year.

Planned spending on Medicaid programs and local school aid would each be cut by $2.85 billion, closing roughly half of a budget gap now estimated at $10 billion, one of the largest in recent history. The likely loss of federal matching funds would roughly double the Medicaid cut, bringing spending down in those programs by about $3 billion more.

Mr. Cuomo’s budget, 2.7 percent less than last year’s, includes relatively few proposals to raise new revenue. It would seek to raise about $456 million for the coming fiscal year, largely with changes to lottery and gambling rules and through more aggressive enforcement of tax laws.

But in a novel and potentially risky move, Mr. Cuomo’s budget does not identify specific Medicaid cuts, relegating those decisions to a task force he appointed last month. The task force, which includes lawmakers and representatives of labor and health care interests, is to make its recommendations in one month — time that may buy Mr. Cuomo, a Democrat, protection from the withering attack advertisements that those same interests typically unleash on governors seeking Medicaid cuts.

Mr. Cuomo’s proposal makes plain his determination to shift the way lawmakers, and the public, view such cuts, laying out how much actual spending will be reduced between last year’s budget and the new one. His budget would reduce school aid spending by $1.54 billion for the coming school year, while Medicaid spending would decrease by just under $1 billion.

Presenting his budget at a state theater in Albany, Mr. Cuomo sounded stern, even angry, about the way past governors and lawmakers had built inexorable spending growth into future budgets, even as he urged the Legislature to join him in reining in government expenditures.

He criticized the current budget process as a “special interest protection program” that resulted in too much spending with too little accountability for performance, and called for a return to what he described as reality-based budgeting.

“It’s not about the industry of government,” Mr. Cuomo said. “It’s not about the bureaucracy of programs. Government is there to serve people.”

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Gov. Andrew M. CuomoCredit
Nathaniel Brooks for The New York Times

And he implicitly faulted Albany lawmakers for opting to use federal stimulus dollars to expand overall spending in recent years, rather than using it to cushion a long-term retrenchment in state spending. Much of the budget’s reduction in year-to-year spending comes as a result of the end of stimulus dollars, Mr. Cuomo said. “We injected it into our body, and it is now gone,” he said. Lawmakers, notably the Assembly speaker, Sheldon Silver, were restrained in their response. Mr. Silver, a Manhattan Democrat who has pledged to work with Mr. Cuomo, praised the budget plan but suggested that lawmakers would closely examine how spending cuts would affect patients, schoolchildren and others.

“As the governor said, this is about people and how this budget affects people,” Mr. Silver said. “There are children in schools, there are senior citizens, there are people in our hospitals, and I think what we need is an evaluation of this proposal.”

Dean G. Skelos, the Senate majority leader and a Republican, questioned the governor’s earlier description of Albany’s budgeting as a “sham” and suggested that Mr. Cuomo’s father, former Gov. Mario M. Cuomo, had not objected to such practices.

Groups likely to bear the brunt of Mr. Cuomo’s cuts — government workers, health care interests and others — were less equivocal.

“We think, unfortunately, cutting services across the board doesn’t really make a lot of sense,” said Danny Donohue, president of the Civil Services Employees Association, the largest union of state workers. “It means less nurses, less highway guys, less snowplow drivers.”

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Even some of Mr. Cuomo’s presumed partners appeared to be balking on Tuesday. Daniel Sisto, the president of the Healthcare Association of New York State and a member of Mr. Cuomo’s Medicaid task force, issued a statement questioning whether the task force would be able to come up with enough cuts to meet Mr. Cuomo’s savings target.

“It will require alchemists, not policy wonks or providers, to transform cuts of this magnitude into gold,” Mr. Sisto said.

Mr. Cuomo will also seek to delay, as his predecessor, David A. Paterson did, large increases in school spending that were mandated by a 2006 court ruling and intended to help poorer school districts. And also like Mr. Paterson, Mr. Cuomo is proposing to eliminate the annual state aid that New York City has received in the past through a state revenue-sharing program.

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Executive budget bills at the state Capitol on Tuesday, the day Gov. Andrew M. Cuomo unveiled his $132.9 billion budget.Credit
Nathaniel Brooks for The New York Times

That sets up a battle with Mayor Michael R. Bloomberg.

“I have said repeatedly,” the mayor said in a statement, “that New York City will find the least painful way to shoulder our share of the burden — but we must be treated equitably with other parts of the state, and we must get reform and relief from Albany’s unfunded mandates.” Noting that other cities faced comparatively minuscule losses, Mr. Bloomberg said, “Unfortunately, the budget does not treat New York City equitably.”

Mr. Cuomo, sticking to a campaign pledge, does not propose extending a temporary state income tax increase on wealthy New Yorkers, creating another likely flash point with Democrats in the Assembly. The governor also would cut $125 million in property-tax rebates as he seeks a permanent cap on local property tax growth.

And Mr. Cuomo’s budget is threaded with language permanently changing the formulas and regulations that determine government spending. This is likely to provoke a serious confrontation with the Legislature, which has, in the past, sought to negotiate these issues separately from the budget.

The budget would limit future growth in state Medicaid programs to the rate of inflation for medical services, a far lower rate of growth than current law envisions. Similar language would cap future growth in school aid.

Mr. Cuomo’s use of task forces offers a glimpse of how he will seek to negotiate with the Legislature and outmaneuver unions and other special interests that dominate the budget process in Albany. In addition to the Medicaid panel, he plans to appoint a task force of lawmakers and prison officials to cut more than 3,500 of the roughly 64,000 adult prison beds in the state. Should the task force fail to agree on prison closings, the commissioner of the corrections department would be empowered to make the decisions unilaterally.

Similarly, the proposal would empower the executive branch to unilaterally make any Medicaid cuts that Mr. Cuomo’s task force is unable to agree to on its own.

In one of the budget’s steepest cuts, proportionately, the budget for state operations, among the larger pots of spending, would be reduced by 10 percent.

The governor said he would try to avoid as many layoffs of state workers as possible. But a table in his budget starkly illustrates the alternative: firing close to 10,000 workers if no agreements with labor unions materialize.

The budget also touches on Mr. Cuomo’s intention to redesign New York’s state bureaucracy, with plans to merge 11 existing agencies or authorities into 4: the corrections department, one of the largest agencies, would be consolidated with the state division of parole, and several agencies that handle programs for domestic violence and crime victims would be moved into the state division of criminal justice services.

Danny Hakim contributed reporting.

A version of this article appears in print on February 2, 2011, on Page A1 of the New York edition with the headline: With Slash Here and Slice There, Cuomo Offers Shrunken Budget. Order Reprints|Today's Paper|Subscribe